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Thursday, 20 February 2014

Murmur is informing taxpayers that a strong proposal is being deliberately pursued to deny “tax-evasion monies” the protection of the BANK SECRECY LAW. Advocates of this idea contend that the laws are created to protect the interest of the innocents and the fruits of their legal labor. Thus, they must not protect and promote the fruits from tax evading flat-form. Meaning, the cash from tax evasion activity including the cars and land that were purchased using the said cash are considered “illegal” and therefore, an illegal act cannot hide behind the laws of the State.

Furthermore, to give the CASH DERIVED FROM TAX EVASION the protection of the bank secrecy law is to give CONSENT AND PERMISSION for tax evaders to HAPPILY continue depriving the BIR the right to collect taxes.

A person, whether an individual or a corporation, is legally considered tax evader if he either underreported his sales or overstated his expenses by thirty [30] percent. In some cases, the premeditated failure/refusal to pay the duly assessed taxes is also classified as a tax evasion activity. For corporation, the president, treasurer, general manager, accountant, bookkeeper and the person who approved and signed tax returns, statements, and schedules shall be held criminally liable.

Acceptably, gross sales and receipts derived from illegal activities are subject to value added and income taxes while the costs and expenses directly related to the conduct of illegal trade are non deductible therefrom.

Unfair? Unacceptable?

Making an illegal income is subject to taxation because there is no law that prohibits the State not to tax them. In this view, the tax return is a the best evidence to prove an illegal activity.

An illegal expense is not allowed as a deduction from legal or illegal income because the act and its fruits executed against the laws of the State is considered VOID ab initio.

By consenting it to be an allowable deduction is to permit the proliferation of illegal activities.

The invigorating BIR audit techniques which would pin down most of the importers are as follows, viz;

Without going to the importers’ principal places of business, BIR shall only secure from its own files the following, viz;

1. past and present inventory list,

2. audited financial statements,

3. income tax return - 1701/1702

4. value added tax returns - 2550Q, and

5. import entry declarations (IED).

2550Q versus IMPORT ENTRY DECLARATION.

The amount in the box ‘IMPORTATION’ of four quarters of 2550Q shall be added up and compared to IED for the same year.

If the 2550Q figures are higher than IED, then, there is a presumption that the import duties and taxes for the difference were not paid. Thus, to pay not the true and correct duties and taxes makes the goods imported to be classified as smuggled/illegal ones. Therefore, amounts associated thereto cannot be allowed as deductions from gross sales and receipts. This overstated the costs of sales, depreciation, and admin expenses, and would be understating the payment of income tax.

On the other hand, if the same would be treated as an undeclared expense, the same amount would also be considered as an understatement of sales, Therefore, the payments of value added and income taxes are also understated.

INVENTORY LIST.

The past and present inventory lists would be utilised. Primarily, the BIR is interested to determine the ratio or components of the imported and local goods in the costs of sales as well as in the administrative expenses. Once established, these ratios can be a very powerful tool to check if the amounts of the smuggled or illegal goods are deliberately classified under the local purchases category in the 2550Q, income tax return and audited financial statements.

AUDITED FINANCIAL STATEMENTS.

Also the BIR is so interested to know the gross profit ratio.

By way of using it, the unsubstantiated costs and expenses would be easily identified. Thus, the corresponding deficiency VAT and income tax therefrom may be computed and collected

Tuesday, 4 February 2014

Yesterday, February 3, 2014, a student of ETM asked his help for chaotic and confusing situations that may lead to graft and corruption in the BIR's frontlines.

The dynamic duo, Honorables as they were called, once again issued a revenue regulation that regulates the filing of 1604CF and the accompanying Alphalist.

The rules therein says that the compensation, whether they are paid, accrued or incurred, shall not be allowed as a deduction from gross income of the claimants if the latter failed or refused to use the facilities of the BIR in submitting the same.

The submission as the said regulation stated is to be via email where the claimant-taxpayer shall email his/her Alphalist to the prescribed email address of the RDO where his/her principal place of office is located or via BIR-portal where he/she is required to type one by one the entries thereof.

Although comical and ridiculous as the new regulation sounds, the dynamic duo who consciously disregarded the fact that their software and hardware are not ready and their manpower are ill-equipped and untrained for the implementation of an untested and untried prescription. The result is madness and frustration on the part of the BIR-frontliners and the filing-taxpayers.

ETM believes that the dynamic duo once again deliberately disregarded the very basic foundation of taxation... that is THE RULE OF TAXATION SHALL BE UNIFORM AND EQUITABLE.

Please be informed that the said regulation is contrary to the laws of the State for no public hearing and consultation has been made. There are so many laws that were violated and ETM is much willing to discuss them in public (maybe TV interview). For his readers, the Philippine Constitution and the Tax Code were maliciously disregarded. There is no uniformity in the application and implementation of the said administrative regulation as well as there is no equitableness because instead of making the tax-compliance fast and easy, the dynamic duo has once again created an opportunity for the graft and corruption monsters to be on the go/move.

Too much regulations and restrictions kill the patriotic desire to pay the true and correct taxes.

Let us make the Philippines a liveable place to raise our family and pursue our dreams.

PLEASE DON'T KILL US BY WAY OF MAKING THE COMPLIANCE WITH THE LAWS OF THE STATE. CUMBERSOME.

“To eradicate the mental, physical, emotional and financial inequalities, we, the people, should eliminate ignorance at once because IGNORANCE is an intentional failure to enrich self with justly knowhow. It is also a disability to timely and correctly apply what is legally right and to immediately unlearn what is immorally wrong.”

Who is ETM?

ETM stands for EMELINO T MAESTRO where the initial ‘T’ means ‘tax’. Biro lang!. T stands for Tolentino. He wrote more than 30 books in the field of taxation, is the Father of Tax Accounting and Tax Guru to others. Professional tax-lecturer of many organizations such as GMA-7, ABS-CBN, Wyeth, Department of Trade and Industry and many more. Founder of the School for Tax Consultants, ETM Tax Agent Office, Auditor Ng Bayan -Ombudsman’s accredited Corruption Prevention Unit, and Tax Accountants Society.

Where ETM stands?

Similar to “Kapamilya” of ABS-CBN, “Kapuso” of GMA-7 and “Kapatid” of TV5, ETM believes that although businesspeople, for the rest of their lives, will compete everyday with one another, it cannot be set aside that these people when it comes to taxation are brothers and sisters. Wherever they go either in a foreign land or within the archipelagos of the Republic of the Philippines, still, they carry with them a name that attracts the attention of and really excites any government - the surname ‘TAXPAYER.’ Therefore, for their best interests, the name ‘Kataxpayer’ or Katax, for short, comes in and may mean ‘a community that helps and assists one another in complying with the laws of the States.

To tax more, BIR employs the Tax-evasion Assault, Benchmarking, Letter of Authority, Letter Notice, Oplan Kandado, Tax Mapping, Surveillance, Subpoena Duces Tecum and Assessment Notice. These tactics and techniques are not only too detrimental and damaging to the Katax’s livelihood but also to their mental and physical health. Definitely, they are contrary to the BIR’s written claims that they are necessary to establish a harmonious relationship and a continual partnership with the same.

Someschools and universities’ personnel as well as some BIR officials are so reluctant to accept that the standards and principles such as the Philippine Financial Reporting Standards (PFRS) and Philippine Standards on Auditing (PSA) are inferior to the obligations created by the laws of the State and notwithstanding the obligations that a contract brings. Moreover, they are too busy romancing with these standards and principles. By doing so, they deliberately failed and still fail to teach and spread the true and correct means in complying with the said laws. Furthermore, they are too complacent that what they produced and will be producing in their campuses and training rooms would match the requirements of the taxpaying public which is seldom to be in the opposite.

Finally, many Katax became and will become the victims and preys of misrepresentation/deceitful-advertising that is (1) a CPA can compute the correctly amount of taxes, (2) lawyers can accurately interpret laws of the State, (3) newly graduates, whether from prestigious or public schools, can immediately deliver the useful reports and recommendations, and (4) BIR officials would have the mental prowess and courage to help and assist first the unfortunate Katax before a civil/criminal penalty shall be slapped. Because of these misconceptions that these misrepresentations bring, the graft and corruption are actively tolerated and the worst of all, they are knowingly encouraged.

IGNORANCE OF THE LAW MUST BE TOTALLY ERADICATED.

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